Can Comfort chase $1.90?

Good day all,

I have been quite bullish on ComfortDelGro, C52.SI, in the last year or so. You can search the archives for my last two posts on Comfort. In my last post, I highlighted Comfort trading near multi-year highs (resistance)- $1.70 region. With a then bullish market, and slightly bullish chart in my eyes (yes, there was a straightforward case for downside since resistance should mean that), I was ready to pounce on a breakout from the long-term trading range. The resistance proved to be strong, and Comfort started correcting down to the 200-day MA, which comes in at around $1.56.

C52

For the sole purpose of showing you all the difference between accuracy of analysis and money management/trade management, I will bring you all through my trading play for Comfort.

Circled in red on the chart below is where I made my previous post on Comfort. For those who are not familiar with Comfort’s chart, the $1.65-$1.70 area is a multi-year high from the 2008 crash. Even though I was somewhat bullish on Comfort, I could not ignore the major resistance. Sometimes when I see an instrument chasing all-time highs or resistance levels, if certain factors tell me to be bullish, my mind will tell me that this time the resistance fails. So I conveniently ignore or overlook the resistance. However, that will not be consistent with one of my principles of taking what I see presently on the chart, and not relying on pure speculation.

C52i

So, I tackled this set-up this way. Instead of going in straightaway, I placed a buy-stop order above the price Comfort was trading at. I told myself that if Comfort was really going to take off to another range, I need not worry about not taking part in the profit. Of course, every trade has to have a pre-determined stop-loss attached. Always. So I did that and waited. Days passed, and the general market soured. Comfort was not spared, and tumbled down several cents. I was quite relieved I did not jump the gun. However, this was to be a longer-term play, so there was no need to give up on the set-up. The general market made a V-rebound and Comfort was swept in the buying pressure too. Very recently, OCBC Research upgraded Comfort from a “hold” to a “buy” – http://www.ocbcresearch.com/Article.aspx?type=research&id=20121212091833_86605 . The target price given is $1.90.

The upgrade probably provided a catalyst for Comfort to stay above the major resistance that it broke through two weeks ago. How high can Comfort go to, now that resistance has been cleared? I do not see any pattern that can give me price projections, and there is no clear resistance levels either. So technically, I do not really have a target for now. But, I believe it is reasonable to think of three scenarios: one, Comfort has cleared the previous price range, and should trade in another range which means Comfort should find the relative high in the weeks/months to come; two, Comfort goes into a mid-term, steady uptrend (channel) which is obviously a very good thing for long players; three, Comfort simply drops back down below $1.70 for reasons that may be (in which case, I get stopped out and live another day to trade). Of course, like I have said many times, I try not to involve pure speculation in analysis.

So the point I am trying to make is this. Had I gone in too early and got stopped out of the long position because of a small pullback, I would be kicking myself many times over because Comfort reversed and shot back up. In the weeks to come, if Comfort holds up well and climbs northwards, think of this: the analysis may be right, but the trader will still lose money if the trade management is weak.

All analyses, recommendations, discussions and other information herein are published for general information. Readers should not rely solely on the information published on this blog and should seek independent financial advice prior to making any investment decision. The publisher accepts no liability for any loss whatsoever arising from any use of the information published herein.

Advertisements

One Trackback

  1. By Comfort finds support « TechnicalAnalysisTalk on June 21, 2013 at 3:54 PM

    […] trended higher after defeating long-term resistance at the $1.70 territory – as discussed in this post. For whatever reason there may be out there, Comfort flew all the way to $2.20 before crashing down […]

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: